Weekly EMEA Base Oil Price Report

Iran is also calling for less dependency on the dollar as a working currency. Quite how this would pan out for a nation heavily dependent on selling crude and petroleum products to other countries remains to be seen.

And so the conflict in the Middle East continues, entering the seventh month with no resolution in sight from either Iran or Washington. The U.S. blockade of Iranian ports continues, with the government in Tehran coming under increasing pressure to alleviate rampant inflation and shortages of everyday goods that are not entering the country, at least by sea.

The only entry points open to Iran are the Caspian ports which are being fully exploited by vessels loading out of northern ports under Russian control. This support for Tehran is crucial and is seen as a lifeline for the population, most of whom are struggling to live.

As usual, oil markets reacted to the new U.S. action; crude oil prices spiked in early global trading Monday.

Drone and missile strikes also continued from both sides of Russia’s war with Ukraine. Ukraine continues to target Russian refineries and warehouses of the Wildberries company, bringing home the realities of Putin’s “Special Operation” to the Russian people. Refinery hits have caused shortages of fuels and lubricants across Russia and have led the Kremlin to exert direct control over Russia’s energy industry.

Fuels and lubricants are being rationed where available, with a number of reports of extremely limited transportation and movement of goods across the country. Prices have rocketed in response to the dearth of supplies, and black markets are springing up to plug gaps, where less than scrupulous operators have been able to lay hands on quantities of gasoline, diesel and lubricating oils.

Recent Ukrainian strikes reportedly caused severe damage to the Slavneft refinery in Yaroslavl, which produces API Group I and III base oils. Private sources close to this region said the refinery ceased operations and may be out of commission for some time. Similar disruptions have occurred at other Russian refineries in cities such as Ufa, Volgograd and Perm.

All exports of petroleum products have been banned by Moscow, and the national distribution system is trying to cope with allocations and shortages. Russian traders have been active in looking for opportunities to import fuel and lubricants from countries such as North Korea and China. Ukraine is also targeting transportation links and routes along which supplies of petroleum products are being ferried to distribution hubs. 

Crude and Gas Oil Prices

Crude prices were lifted by the latest news from the Middle East, which stirred fears of an escalation to the conflict.

Dated deliveries of Brent crude: $90.45/bbl, November front month
West Texas Intermediate: $85.35/bbl, October front month
Low-sulfur gas oil: $1,348, October front month

These prices were obtained from New York ICE at midday Aug. 31, there being a public holiday in London on that date.

Europe

Most players have returned to offices this week, with a number of enquiries being made for supplies of Group I base oils across Europe. The mood appears to one of caution, where a number of buyers have expressed disappointment that prices have not fallen by more than a token amount over the last month.

Certainly, demand has been noticeably low, but there may be scope for deals to be done, with many suppliers keen to move inventories out of tank. Stocks have increased during August, even with a number of refiners optimising production of distillates which are in short supply across Europe due to the continued blockage of the Strait of Hormuz, limiting cargo quantities of diesel and jet fuel emanating from the Gulf.

September forecasts are that demand will start to rise through this month, peaking in October and November, prior to a predicted seasonal slowdown towards the year end.

The Group I market is surprisingly tight, with a number of imported cargoes making up part of the shortfall, particularly for light neutrals, where fuels production has depleted quantities produced during August.

There have also been a number of supply interruptions and production hiccups, due to the very high ambient temperatures experienced across Europe during the summer period.

Producers in Spain have announced problems in St Roque and Cartagena, whilst there are reports that Greek refiners had problems during August. A refinery in Sicily had to limit base oil production for a short time, but reports are that this situation has returned to normal.

The good news is that with heavy rainfall during the last ten days across mainland Europe, the river systems have won a reprieve from the low water levels which became critical during July and August. Rhine levels have returned sufficiently to allow barges to move upstream, but full cargoes are still not yet possible on all stretches of the river.

Prior to July end, European buyers of Group I base stocks held off, anticipating that the Iran situation would have eased and that prices would fall significantly during August. This has not happened, although there has been an element of erosion to prices over the last few weeks.

One major supplier in Europe has announced price reductions across the range of Group I grades. Light neutrals have been reduced by $65/t , whilst heavier neutral grades will see a $60/t reduction. Bright stock prices will be adjusted downwards by $50/t.

This producer normally leads to market in moves, either upwards or down, hence it is reckoned that other sellers will follow this trend.

Overall availabilities dictate that there is no possibility for a European export market a this time.

Prices are lower, but with buyers and sellers regrouping this week, there may be further scope for negotiations on prices.

Group I

European exports, FOB
No market

Northwestern Europe, FCA basis Antwerp-Rotterdam-Amsterdam
SN150: $1,945/t-$1,970/t
SN500: $2,050/t-$2,090/t
Bright stock 150: $2,345/t-$2,375/t

Eastern Europe, FCA
SN85: $1,910/t
SN150: $1,923/t
SN350: $1,955 /t
SN500: $2,100/t
Bright stock 150: $2,228/t

Mediterranean prices, FCA Spain, Greece, Italy
SN150: $1,975/t
SN600/500: $2,085/t
Bright stock: $2,325/t

Pan-European, FOB/FCA
SN150: €1,800/t-€1,865/t
SN500/600: €2,005/t-€2,045/t
Bright stock 150: €2,215/t-€2,270/t

Pan-European prices are assessed on an aggregate basis using prices from Scandinavia, Poland, France, Germany, Benelux, Spain, Italy, Greece, the United Kingdom, and Baltic States.

The euro’s exchange rate with the U.S. dollar was $1.16152 Monday.

European Group II base oil markets were quiet during August but with the last day of August marking a general return to business access Europe, there are stirrings of what may be to come during September and beyond. The oil major that updated Group I levels reduced Group II levels. Prices are now around €2,200/t-€2,245/t for 100 neutral and 150N and to €2,355/t-€2,390/t for 600N.

Group II, FCA basis

110N: €2,200/t-€2,255/t
150N: €2,200- €2,275/t
220N: €2,245/t-€2,295/t
600N: €2,375/t-€2,430/t

Prices refer to a wide range of Group II base oils which may be sourced from within Europe, and also imported from U.S., Red Sea and Asia-Pacific.

Group III supply within Europe is holding in a delicate balance, with large cargoes of duly-approved material moving from Spain to a hub in Northwestern Europe. However, the last cargo for some time may have loaded during last week, and is now en route to Antwerp to discharge. The refinery producing these grades is about to go into turnaround, and the principal has announced to customers that 4 centiStoke product will not be available until November due to an issue with this grade. Other grades, 2 cSt, 3 cSt and 6 cSt, will remain available until resumption of supplies of 4 cSt. Repsol, the joint venture partner in the operation at Cartagena, has also advised customers in writing of the same curtailment for 4 cSt.

It is not clear if quantities of 4 cSt were shipped to the Northwestern European hub prior to the outage.

Another Group III cargo has loaded from Cartagena for receivers on the West Coast of Inidia. It is considered that receivers require fully approved Group III grades to ensure formulations are blended to requirements.

This goes some way to explaining why a cargo of Group III base has loaded from an Indian port and is en route to Europe.

Indian sources have told this report that a cargo of Group III base oils has loaded and sailed for a receiver in Italy. Discharge is believed to be scheduled for Naples, where storage will be available for Group III grades.

With Hormuz still closed, the situation in the Gulf remains too volatile for traders to consider cargoes which could theoretically be loaded from United Arab Emirates. Vessel owners – if it were possible to find any willing to take the risks – would demand inflated freight rates, war risk insurance cover for charterers’ account and prompt demurrage payments if a vessel ran into problems. Conditions such as these are not conducive for traders to act.

One cargo from Indonesia has arrived into Antwerp, and there are reports of another cargo now en route having passed South Africa. The vessel is sailing on a course up the west coast of Africa for Antwerp-Rotterdam-Amsterdam. Incumbent distributors for Middle East Gulf producers in Europe have finally terminated all supplies of material, with little hope that replenishment supplies will be available any time soon.

Prices for Group III grades with partial slates of finished lubricant approvals rose slightly the past week, while values for grades with full slates of approvals are unchanged. Prices for rerefined Group III are unchanged, but demand is high going forward into September, and sellers are only offering to sell to “contracted” or existing buyers.

Group III

Partly approved, FCA Antwerp-Rotterdam-Amsterdam, Northwestern Europe
4 centiStoke : €3,285/t-€3,425pmt
6 cSt : €3,300/t-€3,440/t
8 cSt: €3,255/t-€3,325/t

Fully approved, FCA Antwerp-Rotterdam-Amsterdam, Spain
4 cSt: €3,395/t-€3,445/t
6 cSt: €3,380/t-€3,420/t
8 cSt: €3,425/t-€3,460/t

All the above products sold on a delivered basis will be subject to transportation charges, added to the prices above.

Rerefined Group III, FCA Germany
4 cSt: €3,325/t
5 cSt: €3,295/t
6 cSt: €3,325/t

Baltic Sea

According to reports base oil prices within Russia have leapt by some 85% year on year, but these reports are often inaccurate and having started from an exceptionally low base, prices are estimated to have surged by more than $2,000/t. This mistaking into account exchange rates on ruble to dollar, and inflation rates which are now expected to in excess of 68% for this year alone.

With the latest drone attacks deep into Russian territory, Ukraine has created a nightmare scenario for Russia, by depriving the population of fuels and lubricants to be able to move around the country. Shortages have been extended to commercial vehicles and rail transportation. 

Russia has imposed an export ban on all petroleum products, moving all available fuels and lubricants into the domestic market under government supervision. The Russian energy industry has come under intense pressure from Ukrainian drone strikes on refineries, storage complexes and rail and road transport links to population centres.

All the major base oil producers have experienced hits on their refineries. Lukoil’s refinery in Volgograd has been attacked several times. Rosneft, Bashneft, Gazprom, Tatneft and Slavneft have all lost part or all of their refining capacity. The bottom line is not just that refinery units are being damaged or destroyed but that repairs are almost impossible to organize given a shortage of skilled manpower and unavailability of spare or replacement parts.

Russia is importing fuels from Kazakhstan and North Korea and is looking to China for additional supplies of gasoline, jet kerosene and diesel. The lack of fuels is affecting power generation grids; blackouts and power outages are becoming regular occurrences.

Black Sea & Turkey

A Group II cargo from South Korea discharged in Gebze, Turkey. This cargo consisted of around 8,000 tons of Group II base oils from GS Caltex in South Korea and followed the parcel that arrived in June from Taiwan.

Turkish blenders have not been available for information for the past four weeks but are expected back in the offices during this week or next. The market remains quiet, with blenders restarting operations during September.

Group I base oils were being imported into Turkey from Iran, trucked across the border from suppliers such as Iranol and Sepahan, but this practice is no longer possible. It will not be possible to restart this trade until some time next year, assuming the Iran war finishes at some time in th near future.

Turkish buyers have been relying on Turkmeni and Uzbek barrels for some Group I imports, in addition to Group I grades from Luberef ex Yanbu and from Egyptian producers in Alexandria, Egypt. Enquiries were placed with MOH in Greece, and ExxonMobil from the hub in Valencia, but prices offered were too high to be considered for the Turkish domestic market.

Group I, ex rack Izmir
Spindle oil: Tl 80,006/t plus, VAT Tl 18,030.50/t
SN150: Tl 78,825.00/t plus, VAT Tl 17,794.30/t
SN500: Tl 80,560.00/t plus, VAT Tl 18,141.30/t
Bright stock: Tl 96,914.00/t, plus VAT Tl 21,412.10/t

Sales incur a standard loading charge of Tl 10,146.50/t which should be added to the prices above.

No resale offers will be available for Group II base oils, and there are no offers out of Turkey for either Group I or Group II base stocks. All available material is being retained for domestic blending and local sales. Group III base oils appeared to have been missing from the Turkish market, but the Group II cargo from GS Caltex also contained a small quantity of Group III base oil.

Fully approved Group III from Cartagena, Spain, is no longer being supplied to receivers in Gemlik.

Middle East

July and August Yanbu loadings of base oils has slumped in numbers with Houthis declaring that the Bab-al-Mandeb Strait continues to be closed to Saudi Arabian flagged vessels.

Some base oil cargoes have passed the strait, and it is considered that the vessels may have been Indian flagged, thus being permitted safe passage. The cargoes were delivered into Mumbai anchorage, with another vessel delivering a smaller parcel of around 6,000 tons of Group II base oils into Fujairah.

A part cargo has been delivered into Aqaba in Jordan. The cargo loaded out of Yanbu with a laser quantity on board than the quantity discharged in Aqaba, the vessel will transit Suez and may be bound for Antwerp-Rotterdam-Amsterdam with Group I or Group II grades on board.

Vessels have been loaded from Yanbu for receivers in Egypt, possibly EGPC, taking another cargo of 3,000 tons of bright stock.

With U.S. and Iran resuming hostilities over the weekend, there appears to be no solution in view for any peace accord between the two enemies. The situation has been further exacerbated by the comments from the Iranian Supreme Leader calling for all Muslims to unite against the common enemy, the U.S. and Israel. The Ayatollah was particularly directing his plea to the Middle East Gulf states, having just bombed most them during the U.S. attacks on Iran.

Regarding the Strait of Hormuz, the confusion has been removed, in that the strait remains closed to maritime traffic. The Iranian/Omani negotiations did not appear to yield any solution to allow vessels to transit Hormuz.

Trump’s squeeze on the Iranian economy seems to be progressing at a very slow rate, with few details of new sanctions. Tehran will never admit defeat and request lifting of sanctions which could allow access to markets to purchase goods and services including everyday items such as food and medicines. But with the United Arab Emirates cutting all economic and political ties with Iran, it becomes unclear which partner state Tehran would court, to effect trade and supplies.

Perhaps Pakistan or India could step into the breach, but with geographical distances between Iran and these two possible partners, trade would be difficult.

The blockade of Iranian ports continues in addition to the new strikes over the weekend. Iran holds an ace card with control over the transit of Hormuz and will not give up that advantage easily. The global stage awaits Washington’s whole sanction package to be able to understand the timeline expected from an economic squeeze on Iran.

Base oil supplies of Group I and Group II that had been held in storage in the UAE prior to the start of the Iran war are now exhausted. These stocks were being routinely resold on an FCA basis or delivered by truck.

It is not clear what base oil trade is taking place within Gulf countries at the moment, only that Luberef continues to sell base oils “remotely” through ports such as Sohar, Oman, and Fujairah, UAE, neither of which is subject to a Hormuz transit. It is not clear which traders are involved in moving base oils across the UAE, this report will make some efforts this week to investigate the latest updates on activity.

FCA prices in the UAE for Group I and II are suspended until base oils are again discharged into storage.

Group III base oils, FCA Hamriyah/Sharjah port, or delivered by RTW in the UAE and Oman, were said to be available from Adnoc at Al Ruwais. But business is not realistic at the moment, with distributors closing down operations until progress is made on Hormuz. UAE Group III prices are therefore also suspended, as are netbacks for Group III base oils ex Al Ruwais, Sitra and Ras Laffan.

Africa

A cargo of around 3,000 tons of bright stock is en route to Alexandria to supply under the EGPC contract. The cargo loaded out of Yanbu and with the size of the cargo and the dwt of the vessel, it is understood that the ship will discharge around 3,000 tons of bright stock in Alexandria, and then proceed to Northwestern Europe to discharge the remaining cargo, believed to be Group I and II grades.

The Group II cargo from Luberef discharged in Durban. This may be the last until the Houthi situation can be solved, unless vessels can be chartered which are “approved” by the Houthi rebels. Vessels sailing under the flags of India, China or Pakistan would be acceptable to transit the Bab-al-Mandeb Strait, and this may be part of the answer to moving base oil cargoes southwards from Yanbu and Jeddah.

A cargo of Group II base oils that loaded out of Ulsan, South Korea, during the second half of June has arrived in Durban. Another large Group II parcel loaded ex the U.S. Gulf of Mexico coast during mid-July has also arrived in the South African port. A large base oil cargo loaded out of Rotterdam and Fawley, U.K., at the end of June and will be supplying distributors and affiliated companies in South Africa. The vessel discharged part of its cargo in Durban and is now taking the remainder to Mombasa.

A Group I cargo of around 10,000-11,000 tons of three Group I grades is delivering into Conakry, Guinea, Abidjan, Cote d’Ivoire, and Tema, Ghana.

The Nigerian market has seen an offer for an Indian cargo and is currently heard to be being considered by buyers in Lagos. This follows a previous offer for an Indian cargo of Group I base oils which apparently comprised of Iranian and Russian Group I grades and which would have been priced accordingly.

Buyers in Nigeria are beginning to get short on material now, and may be considering options to be able to continue supplying blenders and resellers around Nigeria.

Currently, there are no suitable availabilities for large Group I cargoes out of the U.S. Gulf or East coasts, and Europe is not an option due to lack of sufficient availabilities.  With prices from elsewhere being maintained at higher levels, it is difficult to see where buyers will turn to take material suitable for resale in the Nigerian market.

Very little has been heard of the venture to introduce Group II base oils into the Nigerian market, and since prices in respect of these grades remain in the upper echelons of the pricing spectrum, this may not be the time to look to expand into premium base oils intros market.

The quality and specifications of the grades in the Indian cargo will be of lower standards, but prices may be the ultimate decider in a Nigerian scenario. A vessel inquiry remains on the market to load a base oil cargo out of either Mumbai anchorage or Haldia, India, for discharge to a “West African port.”

The official exchange rate for the Nigerian naira was NGN 1,337 Monday, while the black market rate was NGN 1,400.

The last cargoes to arrive into Apapa sold at prices valid prior to the Iranian war.

Group I, FCA Apapa
SN150: $885/t
SN500: $925/t
SN900: $1,035/t

Ray Masson is director of Pumacrown Ltd., a trader and broker of petroleum products in London, U.K. Contact him directly at pumacrown@email.com.

Lubes’n’Greases shall not be liable for commercial decisions based on the contents of this report.

Historic and current base oil pricing data are available for purchase in Excel format.